The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in New York, U.S. April 17, 2017. REUTERS/Shannon Stapleton

By Arasu Kannagi Basil

(Reuters) -Morgan Stanley's profit beat estimates in the third quarter as a surge in dealmaking drove revenue to records, and the company's finance chief said its investment banking pipeline is at "all-time highs."

Shares were last up 6.7% after earlier touching a record high. They have risen 32% this year.

"Our equities business affirmed its number one position with a standout quarter," CEO Ted Pick told analysts on a conference call. "A rebound in the investment banking environment reopened the door to strategic M&A and renewed financing activity."

"It is certainly possible that next year we could break 2021 deal volume records," Chief Financial Officer Sharon Yeshaya told Reuters in a phone interview on Wednesday. The IPO pipeline, in particular, shows a lot of activity coming from financial sponsors, she added.

CEO Pick told analysts Morgan Stanley's third-quarter profit beat market expectations with record revenue, led by a 44% rise in investment banking revenue and sharp growth in equities trading.

Pick said the bank reviewed potential acquisitions recently, but decided that it would be better to build up the businesses internally.

The wealth management business reached $8.9 trillion in assets under management, closer to the long-standing goal of $10 trillion, and reached a pre-tax margin of 30.3%.

A string of large deals pushed global mergers and acquisitions activity past the $3 trillion mark this year. A resilient U.S. economy, optimism around interest-rate cuts and lighter regulations under the Trump administration have spurred businesses to do deals or tap capital markets.

"We had very strong results in the investment banking, and we're number one again in the equities business, an area we have been investing," Yeshaya said, adding the bank is seeing better macroeconomic conditions.

"We have higher expectations now for GDP than when we were sitting at the end of the second quarter," the CFO said, adding companies are seeing lower debt costs. Markets are hovering near record highs and the U.S. Federal Reserve resumed its rate-cutting cycle in September.

"This is a great quarter for MS with beats across the board, and we expect the reaction to be supportive," Keith Horowitz, an analyst at Citigroup, wrote in a note.

The bank's profit surged to $4.6 billion, or $2.80 per share, for the three months ended September 30, beating expectations of $2.10 per share, according to estimates compiled by LSEG. Total quarterly revenue was a record $18.2 billion, surpassing expectations of $16.7 billion.

DEALMAKING BOOST

Morgan Stanley's investment banking revenue jumped 44% to $2.11 billion from a year ago. The bank landed key roles in major deals, including advising freight rail giant Union Pacific on its $85 billion acquisition of smaller rival Norfolk Southern - the largest transaction announced globally this year.

Wall Street rivals, including JPMorgan Chase and Goldman Sachs, also benefited from a surge in M&A and initial public offerings.

Morgan Stanley's equity underwriting revenue jumped 80%. The bank was among the joint bookrunners on large IPOs during the quarter, including design software maker Figma and Swedish fintech Klarna.

Fixed income underwriting revenue surged 39% to $772 million in the quarter, driven by higher loan issuances.

TRADING BOOST

Trading, too, was a bright spot as the benchmark S&P 500 index gained roughly 8% in the third quarter and hit multiple record closing highs in September, historically a weak month for stock markets. Equities revenue surged 35% to $4.12 billion, driven by record results in prime brokerage.

WEALTH MARGINS

Revenue from wealth management - a key focus for Morgan Stanley - jumped 13% to a record $8.2 billion in the quarter, buoyed by rising market valuations.

Morgan Stanley also secured a key win last month as the Federal Reserve agreed to shrink how much capital the bank must hold as a result of its most recent "stress test" results. The CFO said discussions with regulators over capital requirements have been "encouraging."

(Reporting by Arasu Kannagi Basil in Bengaluru and Tatiana Bautzer in New York, additional reporting by Manya Saini and Prakhar Srivastava; Editing by Lananh Nguyen, Arun Koyyur and Nick Zieminski)